Madras High Court
Tarajyot Polymers Limited vs Deputy Commercial Tax Officer And Anr. on 30 September, 2004
Equivalent citations: [2005]140STC239(MAD)
Author: K. Raviraja Pandian
Bench: P.D. Dinakaran, K. Raviraja Pandian
ORDER K. Raviraja Pandian, J.
1. In all these cases, the order passed detaining the goods by the first respondent and the refusal of the Taxation Special Tribunal* to interfere with the said orders are put in issue.
2. As the import of the goods, the reason for passing the detention order, the ultimate order passed by the first respondent, the refusal to interfere with the same by the Special Tribunal Printed at page 244 infra. and the argument assailing the said orders on the part of the petitioners and argument on behalf of the Revenue for sustaining the said orders are one and the same, all the cases are taken up together for consideration.
3. The typical case taken up for consideration is W.P. No. 26751 of 2003. The petitioner, a company incorporated under the Companies Act having its registered office at Calcutta, branches at Secunderabad, Pondicherry and Bangalore, inter alia, involved in trading of plastic granules and are assessees on the file of the Assistant Commercial Tax Officer, Secundrabad, having appropriate registration certificate under the Andhra Pradesh General Sales Tax Act and Central Sales Tax Act (hereinafter referred to as "the Central Sales Tax Act"). In the course of their business, the petitioner imported 99 M.Ts of high density polythene granules from M/s. Saudi Basic Industrial Corporation, Saudi Arabia, under invoice dated May 21, 2003. On importation of the consignment, the petitioner's clearing agent one M/s. Guru Shipping and Clearing Services cleared the goods on behalf of the petitioner on June 7, 2003 and warehoused the goods at Continental Warehousing Corporation, Madhavaram, Chennai, a certified warehouse under the Customs Act.
4. While that being so, the first respondent served a goods detention order dated June 7, 2003 by stating the reason that the genuineness of the transactions has to be verified. Incidentally, as the petitioners were faced with a similar detention order on earlier occasion, by their letter dated June 5, 2003, provided complete details of import to the first respondent. In spite of that, the goods detention order was served and by notice dated June 11, 2003 called upon the petitioner to produce certain details as to high-sea sale. The petitioner by their letter dated June 25, 2003 submitted a reply. However, the respondents passed an order levying tax in a sum of Rs. 2,07,900 and a compounding fee of Rs. 4,15,800.
5. The original goods detention order was taken in O.P. to the Special Tribunal, but the Special Tribunal non-suited the petitioner on the ground that subsequently orders have been passed by the first respondent levying tax and composition fee, the petitioner could seek the remedy before the statutory authority, the said orders are put in issue in all these writ petitions.
6. Mr. Natarajan, learned Senior Counsel appearing for the petitioner submitted that the goods detention order and subsequent order of the first respondent levying tax and composition fee is without jurisdiction, as there is no taxable sale at the hands of the petitioner. The State Legislature have no competence in levying tax when the goods are in the course of import. Such levy is prohibited by the Constitution under Article 286 read with Section 5(2) of the Central Sales Tax Act. There is no taxable event and as such there is no reason to come to the conclusion that the petitioner has evaded payment of tax as the goods are yet to be cleared by the customs authority. In the absence of any assessment, the first respondent has no jurisdiction to demand compounding fee. The levying of tax and compounding fee by the first respondent in spite of the details furnished is arbitrary, rather unreasonable and violative of Article 14 of the Constitution of India.
7. The learned Special Government Pleader appearing for the Revenue argued to sustain the order.
8. We heard the argument of the learned counsel on either side and perused the materials on record.
9. The fact that the goods were imported by the petitioner and it had been warehoused and yet to be cleared for home consumption at the time of passing the detention order is not disputed.
10. The first respondent passed an order by concluding that the goods have entered into local area when the goods were stored in the warehouse for which the petitioner is liable to pay tax under the Central Sales Tax Act and Tamil Nadu General Sales Tax Act by stating as follows without giving any reason :
"The dealers have subsequently filed the following documents.
Bill of entry Bill of lading Form XXA Commercial invoice.
It has to be concluded that the goods have entered into local area when the goods were stored in the warehouse for which liability under the Tamil Nadu General Sales Tax Act. They have been effected sales in the course of imports as contended by them ...............
On verification, it was found that the dealers effected high sea sales to one Tvl. Polypack Industries, Chennai and Vigro Polymers, Chennai."
11. After referring the decision of this Court dated March 11, 2003 in Sha Jagroopjee Pukhraj v. Tamil Nadu Taxation Special Tribunal in W.P No. 7329 and 7330 of 2003, etc., batch, straight away passed the abovesaid order levying tax and compounding fee in lieu of prosecution.
12. We are not able to concur with the reasoning given by the first respondent to conclude that the goods entered in the local area when the goods are stored in the warehouse and also the further reasoning that the warehousing attract tax under the Tamil Nadu General Sales Tax Act.
13. Section 47 of the Customs Act refers to clearance of goods for home consumption, while Section 68 of the Act deals with clearance of warehoused goods for home consumption. In this case, the clearance has not been made under Section 47 of the Customs Act for home consumption and the goods were only warehoused. The import would be completed only when the goods crossed the customs barrier and that is the time when the import duty has to be paid. So far as the facts of the present case are concerned, it is not even disputed by the respondents that the goods were cleared for home consumption. Until such time, as the duty payable on the goods is not paid, the amount of duty payable being determined with reference to the rate at which the duty was levied, as on the date of removal of the goods from the warehouse, the goods cannot be regarded as having crossed the customs barrier of India and entered into the local area for use or sale, either attract the entry tax provisions or to the sales tax provisions. The imposition of local tax is forbidden under Article 286 of the Constitution of India.
14. When the import is completed has to be determined with reference to Section 5(2) of the Central Sales Tax Act, which provided that "a sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India". For a sale to be one in the course of import it has to be either one which has occasioned the import or has been effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
15. In this case, though the notice immediately issued after the goods detention order, a wild allegation has been made that the goods were sold by transfer of document of title, but in the ultimate order, nothing has been made out. As seen from the materials available on record, it is pure and simple import of goods from Saudi Arabia. For the purpose of finding out when the goods imported would merge with the general mass of the goods, we will have to see that whether the goods have crossed the customs frontiers. In order to determine the issue whether the goods have crossed the customs frontiers or not, we can have reference to Section 2(ab) of the Central Sales Tax Act, which defines that crossing customs frontiers of India means crossing the limits of the area of a customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. The explanation to the provision provided that "customs station" and "customs authorities" shall have the same meanings as in the Customs Act, 1962. The customs station referred to in this section is one, which is defined under Section 2(13) of the Customs Act, which reads that " 'customs station' means any customs port, customs airport or land customs station". Customs port is defined in the Customs Act in Section 2(12) means any port appointed under Clause (a) of Section 7 to be a customs port and includes a place appointed under Clause (aa) of that section to be an inland container depot. Section 7(a) of the Customs Act enables the Central Government to appoint the ports and airports which alone shall be customs ports or customs airports. The crucial event for the purpose of Section 2(ab) of the Act and consequently for Section 5(2) of the Act is the crossing the limits of the area of the customs station.
16. The similar point has been considered by the division Bench of this Court in the case of State Trading Corporation of India Ltd. v. State of Tamil Nadu [2003] 129 STC 294 and this Court following the decision of the Supreme Court in Kiran Spinning Mills v. Collector of Customs (1999) 113 ELT 753, has concluded that until the goods are cleared for home consumption, it cannot be said that the goods have crossed the customs frontiers. The abovesaid ruling is squarely applicable to the facts of the present case, as the goods have not been cleared for home consumption under Section 68 of the Customs Act. Hence, the first reason given by the first respondent that even if the goods are warehoused, that would amount to entry into local area is nothing but illegal, arbitrary and total non-application of mind to the relevant provisions. No reason, whatsoever, has been given or discussed to come to the conclusion.
17. The other point that mere storing in the warehouse would create liability under the Tamil Nadu General Sales Tax Act is also without any statutory backing, as in order to attract levy of tax under the Tamil Nadu General Sales Tax Act, there must exist a saleable event. The point of high-sea sale in respect of Tvl. Polypack Industries, Chennai and Vigro Polymers, Chennai has been denied by the petitioner. In the order imposing the tax liability, the first respondent has simply stated that on verification it was found that the dealer has effected high sea sale in favour of the abovesaid two industries is without any factual basis or foundation. No factual details have been furnished to come to the conclusion. Hence, we are of the view that the order dated October 6, 2003 levying tax and compounding fee is not in accordance with the provisions contained in the Tamil Nadu General Sales Tax Act.
18. For the foregoing reasons, all the writ petitions are allowed as prayed for. However, there is no order as to costs. Consequently, the connected W.P.M.Ps. are closed.
Writ petitions allowed.
Appendix The decision of the Tamil Nadu Taxation Special Tribunal [O.M. CHANDRASEKAR (Judicial Member)] in VIRGO POLYMER (INDIA) LTD. v. DEPUTY COMMERCIAL TAX OFFICER (O.P. Nos. 864 to 874 of 2003 and O.M.P. Nos. and 871 to 892 of 2003 decided on August 1, 2003) runs as follows :--
VIRGO POLYMER (INDIA) LTD. AND ANR.
v.
DEPUTY COMMERCIAL TAX OFFICER, GROUP II, ENFORCEMENT CENTRAL, GREAMS ROAD, CHENNAI AND ORS.
1. The original petitions have been filed to quash the detention orders passed by the respondent in G.D. Nos. 6/2003-2004 dated May 20, 2003, 19/2003-2004 dated May 30, 2003 and 20/2003/2004 dated June 2, 2003, 25/2003-2004 dated July 9, 2003, 26/2003-2004 dated July 10, 2003 and 1015/2003-2004 to 1020/2003-2004 dated June 7, 2003.
2. A perusal of the impugned orders shows that the respondent has detained the goods to verify the genuineness of the transactions with reference to relevant documents regarding high-sea sales. In a batch of Original Petitions in O.P. Nos. 112/2003, etc., dated February 21, 2003 [P.P. Products (P) Limited v. Deputy Commercial Tax Officer [2005] 139 STC 106 (TNTST)] relating to detention of goods, this Special Tribunal dismissing all the original petitions, held that "what is prayed for by the Revenue is a fair opportunity to verify the genuineness of the transactions and the same cannot be denied."
3. The learned Senior Standing Counsel said that in all the goods detention notices stated above in O.P. Nos. 864 to 874 of 2003, after scrutiny of records available, the respondent has issued final notices of demand of tax and compounding fee on June 10, 2003 and June 11, 2003. Against these final notices, the petitioners can avail a statutory remedy by way of filing revision petitions before the Deputy commissioner concerned under Section 33 of the Tamil Nadu General Sales Tax Act. In view of the submission made by the learned Senior Standing Counsel, there is no point in quashing the impugned order in the goods detention notices impugned in O.P. Nos. 864/2003 to 874/2003. Consequently, all the original petitions (O.P. Nos. 864/2003 to 874/2003) are dismissed with liberty to the petitioner to file revision petitions under Section 33 of the Tamil Nadu General Sales Tax Act, 1959 against all the goods detention notices impugned in O.P. Nos. 864 of 2003 to 874 of 2003. The stay petitions in O.M.P. Nos. 871 of 2003 to 892 of 2003 are also dismissed.
And this Tribunal doth further order that this Order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 1st day of August, 2003.